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Structuring Organizations for Today’s Challenges (Fayol’s Principles of…
Structuring Organizations for
Today’s Challenges
The Development of Organization Design
economies of scale: refers to the fact that companies can reduce their production costs by purchasing materials in bulk
Fayol’s Principles of Organization
Unity of command
Hierarchy of authority
Division of labor
Subordination of individual interests to the general interest
Authority
Degree of centralization
Clear communication channels
Order
Equity
Esprit de corps
Max Weber and Organizational Theory
Job descriptions
Written rules, decision guidelines, and detailed records
Consistent procedures, regulations, and policies
Staffing and promotion based on qualifications
Turning Principles into Organization Design
A hierarchy is a system in which one person is at the top of the organization and there is a ranked or sequential ordering from the top down of managers and others who are responsible to that person
The chain of command is the line of authority that moves from the top of the hierarchy to the lowest level
An organization chart is a visual device that shows relationships among people and divides the organization’s work
bureaucracy came to be the term for an organization with many layers of managers
DECISIONS TO MAKE IN STRUCTURING
ORGANIZATIONS
Centralized authority occurs when decision making is concentrated at the top level of management
Decentralized authority occurs when decision making is delegated to lower-level managers and employees more familiar with local conditions than headquarters management could be
Span of control describes the optimal number of subordinates a manager supervises or should supervise
organizations grew even bigger, adding layer after layer of management to create tall organization structures
organizations have adopted flat organization structures with fewer layers of management
Departmentalization divides organizations into separate units
advantages
Employees can develop skills in depth
The company can achieve economies of scale by centralizing all the resources
Employees can coordinate work within the function
disadvantages
Departments may not communicate well
Employees may identify with their department’s goals rather than the organization’s
The company’s response to external changes may be slow
People may not be trained to take different managerial responsibilities
Department members may engage in groupthink
ORGANIZATIONAL MODELS
line organization has direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization
Line personnel are responsible for directly achieving organizational goals, and include production workers, distribution people, and marketing personnel
Staff personnel advise and assist line personnel in meeting their goals, and include those in marketing research, legal advising, information technology, and human resource management